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Welcome to the June issue of IDAL's newsline.
Despite the regional slowdown in investment activity, Lebanon has maintained a steady growth of foreign direct investments throughout Q1 and Q2 of 2011.
Several economic elements in Lebanon have contributed to this trend, including a traditionally free economy, a robust banking sector, competitive taxation policies and a skilled labor force.
Besides shedding light on national and foreign investments to Lebanon for the past two quarters, this issue covers an analysis of the ICT sector, covering our role in supporting this industry and incentives granted, its lucrative appeal to investors in facts and figures, as well as a snapshot of established ICT companies who have chosen Lebanon for their services.
This issue also highlights the importance of economic zones in attracting foreign capital and stimulating the economy, taking as a case study the Chinese model.
I hope you enjoy this issue. For any feedback do not hesitate to contact our team.
Best Wishes,
Nabil Itani
Chairman and General Manager
Investment Development Authority of Lebanon (IDAL)
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 INVESTMENT PROJECTS MEDIATED BY IDAL
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IDAL processed 4 new investment applications towards the end of 2010, many of which are in implementation stage.
These projects are distributed across the Agro-Industry(2), Technology(1) and ICT(1) sectors. Two are foreign affiliated companies, Cynoprod and Waves, and the remaining two are Greenfield projects, Tayyebat and Cedars Beverage.
These projects are expected to generate 183 jobs and a cumulative investment value of around USD 20 Million.
For more information about IDAL's incentives or to request an application form please refer to our website .
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FOREIGN INVESTMENT TO LEBANON in Q1 and Q2 2011 | 
Foreign investments to Lebanon have maintained their pace in the 1st Quarter of 2011 across various economic sectors, despite the overall regional slowdown in investment activity.
Two significant transactions took place in the Telecommunication and Media sector. The Swedish telecom company, Ericsson, partnered with the local mobile operator Alpha, managed by Egyptian Orascom Telecom, to introduce the 3G technology in Lebanon. Ericsson will be responsible for the upgrade and modernization of the current Alfa mobile network to 3G/ HSPA+ technology across the country.
Monaco Telecom, a Monaco based telecom operator, signed an agreement with eight local TV channels among which are LBC, Future TV and MTV, to add content to its television bouquet. The agreement was signed on January 13, 2011. LBC was set to start its transmission on January 18, 2011, with the remainder in the spring of 2011.
In parallel, a series of foreign companies operating across various fields such as services, manufacturing and electronics have opened branches in Lebanon to serve the local market. |
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ICT- A SECTOR WITH POTENTIAL IN SHAPING THE LEBANESE ECONOMY | 
IDAL'S ROLE IN SUPPORTING THE ICT SECTOR
As part of the Government commitment to support the growth of the ICT sector and with IDAL mandated by Investment Law No. 360 to assist in the support and promotion of Lebanese products, we are in the process of putting in place a program that would help increase investment levels to this sector.
A workshop was organized with key ICT representatives at IDAL's premises, where a preliminary program of cooperation was discussed. Part of the program will include:
1- Holding awareness campaigns on IDAL's incentives for the ICT sector
2- Providing financial and technical support to international fairs
3- Launching of a Technology Internship Program
Our implementation of the program has started with a workshop that we are organizing at the Chamber of Commerce, Industry, and Agriculture of Beirut (CCIAB) on June 21, to provide ICT companies with an overview of the various fiscal and administrative incentives available to them.
WHY THE ICT SECTOR?
The Lebanese Information Communication and Technology (ICT) industry is a very promising sector with potential in shaping the Lebanese economy's landscape if the right policies are adopted on a national level. Potential for the sector stems from the country's labor force which is endowed with the most competitive skills in the region. Around 1200 new ICT university graduates join the sector every year, spread over the fields of engineering, computer science, and applied informatics. This sector offers vast FDI opportunities including investments in software related activities such as financial services software, business applications, in addition to other activities leveraging the multi-lingual workforce (e.g., translation, language, e-learning software).
THE ICT SECTOR IN NUMBERS
- The ICT market in Lebanon is estimated to have a size of 287 million dollars in 2010 (based on data from Business Monitor International (BMI)[1]), and is forecasted to reach a value of 321 million dollars by end of 2011 (or the equivalent of a 11.8% rise) based on similar estimates.
- Employs around 7,000 people.
- Over 20% of Lebanese companies are involved in the IT sector (either in the hardware, software or as internet service providers ). A high share of companies is involved in the wholesale and retail of computers and electronics with a considerable share also involved in software development.
- Almost 25% of firms involved in software business are export oriented with over 75% of their revenue generated outside the country.
- Key exported ICT products include business related applications and web development, as well as software development tasks outsourced from Europe to the Lebanese market. The export of semiconductors has also been picking up in recent years.
- The Gulf region is the primary export destination for Lebanese products; other Middle Eastern countries rank second, whereas European countries rank third, with countries like France at the top of the list.
- Lebanese ICT firms have a prominent presence in the banking sector (almost all procedures are automated,....). Other equally significant fields include retail, education, distribution and general trade.
- Broadband penetration rate was estimated at 4.9% in 2008, better than some of the neighboring countries but still low compared to other emerging economies.
- Mobile penetration rates are in fact among the highest in the region and have totaled 68 % by end of 2010.
INVESTMENTS IN THE ICT SECTOR MEDIATED BY IDAL
IDAL places a high priority for investments in the ICT sector, and extends a wide range of incentives for the sector under Investment Law No. 360. IDAL has already contributed to the establishment of 4 ICT projects:
- A Kuwaiti- Lebanese venture in 2010 established Waves a wireless internet project, distinguished for having introduced WiMax technology into the Lebanese market.
- Lebanese owned Navleb, which launched its car navigation system in 2008.
- Swedish communications leader Ericsson has established a global services delivery center in Lebanon to cater to the local and Middle Eastern Market. The operations of this Beirut subsidiary have been in continuous expansion ever since its establishment in 2007, and the company at present employs 220 individuals.
- Cedarcom Broadband a wireless internet project launched in 2006 has ventured into the provision of fixed and mobile broadband and has captured significant market share until present.
[1]BMI or Business Monitor International is an independent information provider in the fields of Country Risk and Industry Research. |
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THE CHINESE MODEL FOR ECONOMIC ZONES | |
IDAL's investment officer took part in a 3-week intensive trip to the Chinese Economic Zones. It was an invaluable opportunity to get a 1st hand exposure on the management and operation of the world's largest economic zones located in Tianjin city (TEDA area) and Shenzhen city.
The success of Special Economic Zones (SEZs) in China motivated other developing countries to incorporate SEZs into their growth plans. From Indonesia to the Middle East, nations at different stages of development have turned to SEZs to attract foreign capital, boost exports, create jobs, stimulate the industry, and improve upon existing infrastructure. The visit to this zone comes at a time when countries in the region are relying more and more on economic zones to boost foreign investments. Lebanon in its turn, will soon launch its own Economic Zone in the North.
The Chinese model of Economic Zones provides various lessons that can be leveraged when developing a model for a zone:
Institutional Front:
- The zone authority should have sufficient autonomy, particularly over staffing, budgets, spending and policy-making.
- It should have an independent board comprised of key government ministers and private sector representatives.
- It should have in place a one-stop shop that provides the zone authority with single-point authority over other government agencies in core areas.
- The zone should preferably delegate, outsource and privatize as many non-core functions and services as possible in order to focus on core activities.
Operational Front:
- Streamlined procedures for business registration that embody a simple declarative investment registration should be in place.
- Provision of secondary permits and authorizations should be facilitated. Additional permits for land, buildings, labour, health and safety, etc. can be facilitated by vesting all such authorizations within the zone authority rather than other ministries and agencies. The zone authority should have offices within each zone to perform these services.
- Special customs, rules and regulations drawing upon WTO procedures should be implemented.
Incentive Structure:
- Zone regimes should be introduced to rationalize income tax incentives and harmonize zones' corporate income taxation policies with national policies.
- All export obligations should be removed and zone enterprises should be allowed full access to the domestic market on a duty-paid basis.
Strategic Framework:
- Public-private partnership should be in place to ensure quality zone infrastructure.
- Strong backward linkages with hinterland/Domestic Tariff Area (DTA) should be leveraged.
- All SEZs should be strategically positioned as complementary to each other, and should serve their own market niches respectively.
- The SEZ should provide a natural gateway that could serve as a source of capital and conduit for the movement of goods in the manner that Hong Kong and Taiwan function for China.
- SEZs should be measured for performance by analyzing a zone's profitability.
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EXPORT PROMOTION | 
IDAL renewed its Export Plus program that ended in Q1 for another 4 months, providing the opportunity for 125 exporters to keep benefiting from its subsidy scheme. |
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IN THE NEWS |
- IDAL organised workshops on June 8 and June 15 at the Chamber of Commerce, Industry, and Agriculture in Tripoli and the Association of Banks in Lebanon respectively in order to increase awarness on Investment Law 360 and our various services and incentives.
- IDAL participated at the Arab Economic Forum held in May in Beirut
- IDAL participated at the 14th German-Arab Business Forum in Berlin in May 2011
- IDAL participated at the 3rd Arab Conference of Information and Telecommunications in the Middle East and North Africa MENA ICT 2011 in Syria last March
- The Australian Ambassador to Lebanon, Mr. Lex Bartlem visited IDAL in February 2011 to discuss trade exchange and promoting common investments between Lebanon and Australia. Ambassador Bartlem stressed on the need to reinforce economic relations between the two countries especially that trade exchange between them is still limited, underlining the efficient role of the Lebanese community in this context.
- A delegation from Alexandria Businessmen Association presided by the president of the Investment and Finance Committee, Abdel Menem Hafez, visited IDAL in January 2011. The Lebanese and the Egyptian parties discussed bilateral relations and how to take it further.
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The Investment Development Authority of Lebanon (IDAL) is the national investment promotion agency that was established in 1994 with the aim of promoting Lebanon as key investment destination, and attracting, facilitating and retaining investments in the country. IDAL reports to the President of the Council of Ministers who exercises a tutorial authority over it. |
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| ANNUAL REPORT 2010 | |
Our Annual Report is out. You can find it available in English and Arabic.
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INCENTIVES ZOOM-IN ICT Sector
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Package Deal Contract Incentives
Under this scheme, investors receive a package of incentives, exemptions and reductions. Incentives provided include:
- exemption on land registration fees
- exemption from income tax for a certain period of time
- exemption from taxes on project dividends
- reduction on construction permits and residence permit fees.
To qualify for this scheme, an ICT project needs to have a minimum investment value of 400,000 USD and should generate 25 job opportunities.
Investment Projects Incentives
Incentives provided include:
- exemptions on income tax over a certain period of time
- the provision of work permits.
The Investment Project scheme divides Lebanon into three geographical zones (Zone A, Zone B and Zone C) and grants incentives according to these zones.
To qualify for this scheme, an ICT project needs to have a minimum investment value of 200,000 USD in any part of Lebanon.
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